Berry Corporation (bry) (NASDAQ: BRY) (“Berry” or the “Company”)
today reported net loss of $19 million or $0.24 per diluted share
and Adjusted Net Income(1) of $13 million or $0.17 per diluted
share for the third quarter of 2020.
Quarterly Highlights
- Generated $48 million of Levered Free Cash Flow(1); on pace for
more than $100 million for the year
- Built cash reserves of nearly $50 million
- Improved Adjusted EBITDA(1) to $62 million on sustained cost
savings and improving price realizations
- Reduced OpEx an additional 6% quarter over quarter
- Welcomed Fernando Araujo as chief operating officer and
executive vice president
_______
(1) Please see “Non-GAAP Financial
Measures and Reconciliations” later in this press release for a
reconciliation and more information on these
Non-GAAP measures.
“This quarter Berry once again demonstrated its
ability to create value even in a down cycle. We believe we
are well positioned to emerge from what we anticipate to be a
two-year cycle in a strong position for future growth,” said Trem
Smith, Berry board chair and chief executive officer. "We are
producing affordable energy in an efficient, environmentally
sensitive, and safe manner, managing our financials to ensure we
will prosper, and building our vision for the future.
"Oil and gas, especially locally produced oil
and gas, continues to be a long-term component of any reliable,
affordable, and equitable energy future in the developed and
developing economies of the world. It is my strong view that
the industry can no longer take a ‘business as usual’ approach. At
Berry, we understand that alignment with a state’s environmental
goals is critical for the joint success of our organization, the
industry, and the communities where we operate. We are committed to
the future of affordable energy and have a vision for how we
participate meaningfully in the energy transition, which includes
innovation, technology and operational excellence,” Smith
continued.
Third Quarter 2020 Results
Adjusted EBITDA(1), on a hedged basis, was $62
million in the third quarter 2020, 9% higher than $57 million in
the second quarter 2020. The increase was mostly due to lower OpEx
and better oil price realizations which more than offset the lower
production volumes.
Average daily production decreased 5% for the
third quarter of 2020 compared to the second quarter of 2020,
largely due to natural declines as a result of pausing drilling
activity in April. Further, the Company undertook certain
operational improvements that caused temporary reductions in our
production. Notably, we performed some plugging and abandonment
activity that resulted in temporary shut-in of nearby wells.
Additionally, improved steam management reduced overall costs but
temporarily increased water disposal and well maintenance needs,
resulting in a slight decrease in production. The Company's
California production of 22.2 MBoe/d for the third quarter of 2020
decreased 5% from the second quarter 2020.
The Company-wide hedged realized oil price for
the third quarter 2020 was $56.16/Bbl, a 3% increase from the
second quarter. The California average oil price before hedges for
the third quarter was $40.02/Bbl, or 92% of Brent, which was 36%
higher than the $29.53/Bbl in the second quarter 2020, which was
88% of Brent. The financial hedges for oil sales for the third
quarter 2020 added $16.28/Bbl to the realized price, highlighting
the effectiveness of the Company's oil hedge positions.
OpEx consists of lease operating expenses
("LOE"), third-party revenues and expenses from electricity
generation, transportation and marketing activities, as well as the
effect of derivative settlements (received or paid) for gas
purchases, and excludes taxes other than income taxes.
On a hedged basis, operating expenses decreased
by 6% or $1.14 per Boe to $16.97 for the third quarter 2020,
compared to $18.11 for the second quarter 2020. The decrease was
largely due to increased electricity revenues resulting from higher
seasonal capacity payments. During the third quarter, the Company
sustained the cost savings achieved in the first half of 2020,
while hedged fuel and non-fuel costs were essentially flat to the
second quarter 2020.
General and administrative expenses increased by
$0.4 million, or 2%, to approximately $19 million for the three
months ended September 30, 2020, compared to the second quarter
2020. The third quarter 2020 non-recurring costs mainly consisted
of costs related to the retirement of the former COO and hiring a
new one. Adjusted general and administrative expenses(1), which
exclude non-cash stock compensation costs and nonrecurring costs,
were $14 million for both the third and second quarter 2020. These
cost levels include a slight reduction in headcount since early
2020, although none of these reductions are a result of the current
economic environment.
Taxes, other than income taxes were $3.91 per
Boe for the third quarter compared to $3.94 per Boe in the second
quarter 2020. Greenhouse gas ("GHG") costs were lower in the third
quarter of 2020 as the prices remained relatively flat while the
emission volumes declined. However, the Company experienced higher
property tax rates, as well as higher severance tax rates due to
the expiration of certain deductions.
Net loss for the third quarter 2020 was $19
million compared to $65 million in the second quarter 2020.
Adjusted Net Income(1) was $13 million for the third quarter,
representing a $9 million increase from the second quarter 2020 due
to lower OpEx; depreciation, depletion and amortization; taxes
other than income taxes; Adjusted general and administrative
expenses; and income taxes. Net loss was $0.24 per diluted share
and Adjusted Net Income was $0.17 per diluted share for the third
quarter of 2020.
For the third quarter 2020, capital expenditures
were approximately $4 million on an accrual basis excluding
capitalized overhead, capitalized interest, acquisitions and asset
retirement spending. Year-to-date capital expenditures were $57
million. In the third quarter 2020, the vast majority of capital
spent was used for activities which had no impact on current
production, including capital for facilities maintenance and
equipping. Berry also spent approximately $4 million for
plugging and abandonment activities in the third quarter.
At September 30, 2020, the Company had liquidity
of $192 million consisting of $49 million cash in the bank and $143
million available for borrowings under its RBL Facility which had
no borrowings and $7 million of letters of credit outstanding. The
RBL Facility has a $200 million borrowing base with an elected
commitment of $200 million, limited to $150 million until the next
semi annual redetermination in November at which time it is
currently expected the availability will return to this elected
commitment amount.
“We planned for a two-year downturn earlier this
year with a sharp focus on improving efficiencies, reducing costs,
building cash and managing our production decline. To date, we have
been successful across the board. Our significant cost reductions
have resulted in a strong cash position and our 2020 production
will be flat to the prior year while holding our capital spending
at the planned levels. As we look to 2021, our plan is to maintain
our production relatively flat year-over-year and the cash we
built this year will support those efforts, and we do not currently
expect to need to draw on our revolver through the end of 2021.
Obviously, we work in a dynamic environment and market conditions
can change rapidly but we are currently optimistic about our
financial outlook for 2021,” stated Cary Baetz, chief financial
officer, EVP and director.
_______
(1) Please see “Non-GAAP Financial Measures and
Reconciliations” later in this press release for a reconciliation
and more information on these Non-GAAP measures.
Earnings Conference Call
The Company will host a conference call November 4, 2020 to
discuss these results:
Live Call Date: |
Wednesday, November 4, 2020 |
Live Call Time: |
9:00 a.m. Eastern Time (6 a.m.
Pacific Time) |
Live Call Dial-in: |
877-491-5169 from the
U.S. |
|
720-405-2254 from
international locations |
Live Call Passcode: |
2295589 |
|
|
An audio replay will be available shortly after the
broadcast:
Replay Dates: |
Through Wednesday, November 18, 2020 |
Replay Dial-in: |
855-859-2056 from the
U.S. |
|
404-537-3406 from
international locations |
Replay Passcode: |
2295589 |
|
|
A replay of the audio webcast will also be
archived on the “Events” section of Berry’s
website at bry.com/category/events. In addition, an
investor presentation will be available on the Company’s
website.
About Berry Corporation
(bry)
Berry is a publicly traded (NASDAQ: BRY) western
United States independent upstream energy company with a focus on
the conventional, long-lived oil reserves in the San Joaquin basin
of California. More information can be found at the Company’s
website at bry.com.
Forward-Looking Statements
The information in this press release includes
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. All statements, other than statements of historical
facts, included in this press release that address plans,
activities, events, objectives, goals, strategies, or developments
that the Company expects, believes or anticipates will or may occur
in the future, such as those regarding financial position;
liquidity; cash flows; anticipated financial and operating,
results; capital program and development and production plans;
operations and business strategy; potential acquisition
opportunities; reserves; hedging activities; capital expenditures,
return of capital; payment, improvement of future dividends; future
repurchases of stock or debt; capital investments, recovery factors
and other guidance are forward-looking statements. The
forward-looking statements in this press release are based upon
various assumptions, many of which are based, in turn, upon further
assumptions. Although we believe that these assumptions were
reasonable when made, these assumptions are inherently subject to
significant uncertainties and contingencies which are difficult or
impossible to predict and are beyond our control. Therefore, such
forward-looking statements involve significant risks and
uncertainties that could materially affect our expected results of
operations, liquidity, cash flows and business prospects.
Berry cautions you that these forward-looking
statements are subject to all of the risks and uncertainties,
incident to the exploration for and development, production,
gathering and sale of natural gas, NGLs and oil most of which are
difficult to predict and many of which are beyond Berry’s control.
These risks include, but are not limited to, commodity price
volatility and the impact and duration of the ongoing COVID-19
pandemic, legislative and regulatory initiatives in California or
our other areas of operation addressing climate change or other
environmental concerns; investment in and development of competing
or alternative energy sources; drilling and other operating
risks, the uncertainty inherent in estimating natural gas and oil
reserves and in projecting future rates of production, cash flow
and access to capital, the timing and funding of development
expenditures, environmental risks, effects of hedging arrangements,
potential shut-ins of production due to lack of downstream demand
or storage capacity and the other risks described under the heading
"Item 1A. Risk Factors" in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2019 and in its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2020.
You can typically identify forward-looking
statements by words such as aim, anticipate, achievable, believe,
budget, continue, could, effort, estimate, expect, forecast, goal,
guidance, intend, likely, may, might, objective, outlook, plan,
potential, predict, project, seek, should, target, will or would
and other similar words that reflect the prospective nature of
events or outcomes.
Any forward-looking statement speaks only as of
the date on which such statement is made, and we undertake no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise
except as required by applicable law. Investors are urged to
consider carefully the disclosure in our filings with the
Securities and Exchange Commission, available from us at via our
website or via the Investor Relations contact below, or from the
SEC’s website at www.sec.gov.
Contact
Contact: Berry Corporation Todd Crabtree -
Manager, Investor Relations (661) 616-3811 ir@bry.com
Tables Following
The financial information and certain other
information presented have been rounded to the nearest whole number
or the nearest decimal. Therefore, the sum of the numbers in a
column may not conform exactly to the total figure given for that
column in certain tables. In addition, certain percentages
presented here reflect calculations based upon the underlying
information prior to rounding and, accordingly, may not conform
exactly to the percentages that would be derived if the relevant
calculations were based upon the rounded numbers, or may not sum
due to rounding.
SUMMARY OF RESULTS
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
|
|
($ and shares in thousands, except per share amounts) |
Statement of
Operations Data: |
|
|
|
|
|
Revenues and
other: |
|
|
|
|
|
Oil, natural gas and natural gas liquids sales |
$ |
92,239 |
|
|
|
$ |
70,515 |
|
|
|
$ |
141,250 |
|
|
Electricity sales |
8,744 |
|
|
|
4,884 |
|
|
|
7,460 |
|
|
(Losses) gains on oil derivatives |
(11,564 |
) |
|
|
(42,267 |
) |
|
|
45,509 |
|
|
Marketing revenues |
330 |
|
|
|
292 |
|
|
|
413 |
|
|
Other revenues |
0 |
|
|
|
29 |
|
|
|
40 |
|
|
Total revenues and other |
89,749 |
|
|
|
33,453 |
|
|
|
194,672 |
|
|
|
|
|
|
|
|
Expenses and
other: |
|
|
|
|
|
Lease operating expenses |
45,243 |
|
|
|
40,733 |
|
|
|
50,957 |
|
|
Electricity generation expenses |
4,217 |
|
|
|
3,022 |
|
|
|
3,781 |
|
|
Transportation expenses |
1,768 |
|
|
|
1,789 |
|
|
|
2,067 |
|
|
Marketing expenses |
326 |
|
|
|
280 |
|
|
|
398 |
|
|
General and administrative expenses |
19,173 |
|
|
|
18,777 |
|
|
|
16,434 |
|
|
Depreciation, depletion and amortization |
35,905 |
|
|
|
37,512 |
|
|
|
27,664 |
|
|
Taxes, other than income taxes |
9,913 |
|
|
|
10,449 |
|
|
|
9,249 |
|
|
(Gains) losses on natural gas derivatives |
(15,784 |
) |
|
|
925 |
|
|
|
3,008 |
|
|
Other operating (income) expenses |
1,648 |
|
|
|
(1,192 |
) |
|
|
(550 |
) |
|
Total expenses and other |
102,409 |
|
|
|
112,295 |
|
|
|
113,008 |
|
|
|
|
|
|
|
|
Other (expenses)
income: |
|
|
|
|
|
Interest expense |
(8,391 |
) |
|
|
(8,676 |
) |
|
|
(8,597 |
) |
|
Other, net |
(3 |
) |
|
|
(6 |
) |
|
|
(77 |
) |
|
Total other (expenses) income |
(8,394 |
) |
|
|
(8,682 |
) |
|
|
(8,674 |
) |
|
Reorganization items, net |
— |
|
|
|
— |
|
|
|
(170 |
) |
|
(Loss) income before
income
taxes |
(21,054 |
) |
|
|
(87,524 |
) |
|
|
72,820 |
|
|
Income tax (benefit)
expense |
(2,190 |
) |
|
|
(22,623 |
) |
|
|
20,171 |
|
|
Net (loss)
income |
$ |
(18,864 |
) |
|
|
$ |
(64,901 |
) |
|
|
$ |
52,649 |
|
|
|
|
|
|
|
|
Net (loss) income per
share: |
|
|
|
|
|
Basic |
$ |
(0.24 |
) |
|
|
$ |
(0.81 |
) |
|
|
$ |
0.65 |
|
|
Diluted |
$ |
(0.24 |
) |
|
|
$ |
(0.81 |
) |
|
|
$ |
0.65 |
|
|
|
|
|
|
|
|
Weighted-average shares of
common stock outstanding - basic |
79,879 |
|
|
|
79,795 |
|
|
|
80,982 |
|
|
Weighted-average shares of
common stock outstanding - diluted |
79,879 |
|
|
|
79,795 |
|
|
|
81,051 |
|
|
|
|
|
|
|
|
Adjusted Net Income(1) |
$ |
13,452 |
|
|
|
$ |
4,609 |
|
|
|
$ |
32,760 |
|
|
Weighted-average shares of
common stock outstanding - diluted |
80,062 |
|
|
|
80,640 |
|
|
|
81,051 |
|
|
Diluted earnings per share on
Adjusted Net Income |
$ |
0.17 |
|
|
|
$ |
0.06 |
|
|
|
$ |
0.40 |
|
|
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
|
|
($ and shares in thousands, except per share amounts) |
Adjusted EBITDA(1) |
$ |
61,515 |
|
|
|
$ |
57,433 |
|
|
|
$ |
83,931 |
|
|
Adjusted EBITDA
unhedged(1) |
$ |
26,039 |
|
|
|
$ |
5,559 |
|
|
|
$ |
68,778 |
|
|
Levered Free Cash Flow(1) |
$ |
47,698 |
|
|
|
$ |
32,229 |
|
|
|
$ |
2,126 |
|
|
Levered Free Cash Flow
unhedged(1) |
$ |
12,222 |
|
|
|
$ |
(19,645 |
) |
|
|
$ |
(13,027 |
) |
|
Adjusted General and
Administrative expenses(1) |
$ |
13,888 |
|
|
|
$ |
14,081 |
|
|
|
$ |
13,940 |
|
|
Effective Tax Rate |
10 |
|
% |
|
26 |
|
% |
|
28 |
|
% |
Cash Flow
Data: |
|
|
|
|
|
Net cash provided by operating
activities |
$ |
57,997 |
|
|
|
$ |
41,939 |
|
|
|
$ |
68,774 |
|
|
Net cash used in investing
activities |
$ |
(9,004 |
) |
|
|
$ |
(22,480 |
) |
|
|
$ |
(63,739 |
) |
|
Net cash used in financing
activities |
$ |
(1,373 |
) |
|
|
$ |
(19,460 |
) |
|
|
$ |
(5,262 |
) |
|
__________
(1) See further discussion and
reconciliation in “Non-GAAP Financial Measures and
Reconciliations”.
|
September 30, 2020 |
|
December 31, 2019 |
|
|
|
($ and shares in thousands) |
Balance Sheet
Data: |
|
|
|
Total current assets |
$ |
174,394 |
|
|
$ |
100,432 |
|
Total property, plant and
equipment, net |
$ |
1,260,755 |
|
|
$ |
1,576,267 |
|
Total current liabilities |
$ |
95,574 |
|
|
$ |
156,628 |
|
Long-term debt |
$ |
393,219 |
|
|
$ |
394,319 |
|
Total equity |
$ |
774,625 |
|
|
$ |
972,448 |
|
Outstanding common stock
shares as of |
79,892 |
|
|
79,543 |
|
SUMMARY BY AREA
The following table shows a summary by area of
our selected historical financial information and operating data
for the periods indicated.
|
California (San Joaquin and Ventura
basins) |
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
($ in thousands, except prices) |
|
|
|
|
|
Oil, natural gas and natural gas liquids sales |
$ |
81,592 |
|
|
$ |
62,943 |
|
|
$ |
124,540 |
|
Operating income (1) |
$ |
36,296 |
|
|
$ |
32,469 |
|
|
$ |
66,449 |
|
Depreciation, depletion, and
amortization (DD&A) |
$ |
34,779 |
|
|
$ |
36,518 |
|
|
$ |
24,360 |
|
Average daily production
(MBoe/d) |
22.2 |
|
|
23.4 |
|
|
23.0 |
|
Production (oil % of
total) |
100 |
% |
|
100 |
% |
|
100 |
% |
Realized sales prices: |
|
|
|
|
|
Oil (per Bbl) |
$ |
40.02 |
|
|
$ |
29.53 |
|
|
$ |
59.00 |
|
NGLs (per Bbl) |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Gas (per Mcf) |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Capital expenditures(2) |
$ |
4,467 |
|
|
$ |
15,916 |
|
|
$ |
59,076 |
|
|
Utah (Uinta basin) |
|
Colorado (Piceance basin) |
|
Three Months Ended |
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
($ in thousands, except prices) |
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas and natural gas liquids sales |
$ |
9,311 |
|
|
$ |
6,439 |
|
|
|
$ |
14,946 |
|
|
$ |
1,336 |
|
|
|
$ |
1,132 |
|
|
$ |
1,758 |
|
|
Operating income
(loss)(1) |
$ |
1,093 |
|
|
$ |
(584 |
) |
|
|
$ |
1,376 |
|
|
$ |
(235 |
) |
|
|
$ |
6 |
|
|
$ |
(123 |
) |
|
Depreciation, depletion, and
amortization (DD&A) |
$ |
915 |
|
|
$ |
905 |
|
|
|
$ |
3,039 |
|
|
$ |
165 |
|
|
|
$ |
43 |
|
|
$ |
264 |
|
|
Average daily production
(MBoe/d) |
4.1 |
|
|
4.4 |
|
|
|
5.1 |
|
|
1.3 |
|
|
|
1.3 |
|
|
1.5 |
|
|
Production (oil % of
total) |
47 |
% |
|
49 |
|
% |
|
52 |
% |
|
2 |
|
% |
|
2 |
% |
|
2 |
|
% |
Realized sales prices: |
|
|
|
|
|
|
|
|
|
|
|
Oil (per Bbl) |
$ |
38.40 |
|
|
$ |
23.11 |
|
|
|
$ |
48.74 |
|
|
$ |
33.60 |
|
|
|
$ |
20.67 |
|
|
$ |
56.18 |
|
|
NGLs (per Bbl) |
$ |
13.25 |
|
|
$ |
5.82 |
|
|
|
$ |
12.10 |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
Gas (per Mcf) |
$ |
2.05 |
|
|
$ |
1.68 |
|
|
|
$ |
2.21 |
|
|
$ |
1.80 |
|
|
|
$ |
1.53 |
|
|
$ |
1.99 |
|
|
Capital expenditures(2) |
$ |
103 |
|
|
$ |
82 |
|
|
|
$ |
1,851 |
|
|
$ |
46 |
|
|
|
$ |
145 |
|
|
$ |
213 |
|
|
__________
(1) Operating income (loss) includes
oil, natural gas and NGL sales, and scheduled oil derivative
settlements, offset by operating expenses (as defined elsewhere),
general and administrative expenses, DD&A, impairment of oil
and gas properties, and taxes, other than income taxes.
(2) Excludes corporate capital
expenditures.
COMMODITY PRICING
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
Weighted-average
realized sales prices: |
|
|
|
|
|
Oil without hedges ($/Bbl) |
$ |
39.88 |
|
|
$ |
28.98 |
|
|
$ |
57.92 |
|
Effects of scheduled
derivative settlements ($/Bbl) |
$ |
16.28 |
|
|
$ |
25.42 |
|
|
$ |
7.31 |
|
Oil with hedges ($/Bbl) |
$ |
56.16 |
|
|
$ |
54.40 |
|
|
$ |
65.23 |
|
Natural gas ($/Mcf) |
$ |
1.95 |
|
|
$ |
1.62 |
|
|
$ |
2.12 |
|
NGLs ($/Bbl) |
$ |
13.25 |
|
|
$ |
5.82 |
|
|
$ |
12.10 |
|
|
|
|
|
|
|
Average Benchmark
prices: |
|
|
|
|
|
Oil (Bbl) – Brent |
$ |
43.34 |
|
|
$ |
33.39 |
|
|
$ |
62.03 |
|
Oil (Bbl) – WTI |
$ |
40.87 |
|
|
$ |
28.42 |
|
|
$ |
56.33 |
|
Natural gas (MMBtu) – Kern,
Delivered(1) |
$ |
2.84 |
|
|
$ |
1.45 |
|
|
$ |
2.50 |
|
Natural gas (MMBtu) – Henry
Hub(2) |
$ |
2.00 |
|
|
$ |
1.70 |
|
|
$ |
2.38 |
|
__________
(1) Kern, Delivered Index is the
relevant index used for gas purchases in California.
(2) Henry Hub is the relevant index
used for gas sales in the Rockies.
CURRENT HEDGING SUMMARY
As of September 30, 2020, we had the following crude oil
production and gas purchases hedges.
|
Q4 2020 |
|
1H 2021 |
|
2H 2021 |
|
|
|
|
|
|
Fixed Price Oil Swaps
(Brent): |
|
|
|
|
|
Hedged volume (MBbls) |
2,208 |
|
|
3,438 |
|
|
2,084 |
|
Weighted-average price ($/Bbl) |
$ |
59.85 |
|
|
$ |
45.82 |
|
|
$ |
46.17 |
|
Purchased Oil Calls
Options (Brent): |
|
|
|
|
|
Hedged volume (MBbls) |
276 |
|
|
— |
|
|
— |
|
Weighted-average price ($/Bbl) |
$ |
65.00 |
|
|
$ |
— |
|
|
$ |
— |
|
Fixed Price Gas
Purchase Swaps (Kern, Delivered): |
|
|
|
|
|
Hedged volume (MMBtu) |
5,060,000 |
|
|
9,045,000 |
|
|
5,535,000 |
|
Weighted-average price ($/MMBtu) |
$ |
2.76 |
|
|
$ |
2.71 |
|
|
$ |
2.73 |
|
Fixed Price Gas
Purchase Swaps (SoCal Citygate): |
|
|
|
|
|
Hedged volume (MMBtu) |
155,000 |
|
|
— |
|
|
— |
|
Weighted-average price ($/MMBtu) |
$ |
3.80 |
|
|
$ |
— |
|
|
$ |
— |
|
In October 2020, we added 12,500 MMBtu/d of
fixed price gas sales swaps at an average price of $2.96, indexed
to Northwest Pipeline Rocky Mountains and CIG, for the period
January 1, 2021 through December 31, 2021.
OPERATING EXPENSES
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
|
|
|
|
($ in thousands except per Boe amounts) |
Lease operating expenses |
$ |
45,243 |
|
|
$ |
40,733 |
|
|
$ |
50,957 |
|
Electricity generation
expenses |
4,217 |
|
|
3,022 |
|
|
3,781 |
|
Electricity sales(1) |
(8,744 |
) |
|
(4,884 |
) |
|
(7,460 |
) |
Transportation expenses |
1,768 |
|
|
1,789 |
|
|
2,067 |
|
Transportation sales(1) |
0 |
|
|
(29 |
) |
|
(40 |
) |
Marketing expenses |
326 |
|
|
280 |
|
|
398 |
|
Marketing revenues(1) |
(330 |
) |
|
(292 |
) |
|
(413 |
) |
Derivative settlements paid
for gas purchases(1) |
614 |
|
|
7,362 |
|
|
2,088 |
|
Total operating expenses(1) |
$ |
43,094 |
|
|
$ |
47,981 |
|
|
$ |
51,378 |
|
|
|
|
|
|
|
Lease operating expenses
($/Boe) |
$ |
17.83 |
|
|
$ |
15.37 |
|
|
$ |
18.74 |
|
Electricity generation
expenses ($/Boe) |
1.66 |
|
|
1.14 |
|
|
1.39 |
|
Electricity sales ($/Boe) |
(3.45 |
) |
|
(1.84 |
) |
|
(2.74 |
) |
Transportation expenses
($/Boe) |
0.69 |
|
|
0.67 |
|
|
0.76 |
|
Transportation sales
($/Boe) |
0.00 |
|
|
(0.01 |
) |
|
(0.01 |
) |
Marketing expenses
($/Boe) |
0.13 |
|
|
0.11 |
|
|
0.15 |
|
Marketing revenues
($/Boe) |
(0.13 |
) |
|
(0.11 |
) |
|
(0.15 |
) |
Derivative settlements paid
for gas purchases ($/Boe) |
0.24 |
|
|
2.78 |
|
|
0.77 |
|
Total operating expenses ($/Boe) |
$ |
16.97 |
|
|
$ |
18.11 |
|
|
$ |
18.90 |
|
Total unhedged operating expenses ($/Boe)(2) |
$ |
16.73 |
|
|
$ |
15.33 |
|
|
$ |
18.13 |
|
|
|
|
|
|
|
Total MBoe |
2,537 |
|
|
2,650 |
|
|
2,719 |
|
__________
(1) We report electricity,
transportation and marketing sales separately in our financial
statements as revenues in accordance with GAAP. However, these
revenues are viewed and used internally in calculating operating
expenses which is used to track and analyze the economics of
development projects and the efficiency of our hydrocarbon
recovery. We purchase third-party gas to generate electricity
through our cogeneration facilities to be used in our field
operations activities and view the added benefit of any excess
electricity sold externally as a cost reduction/benefit to
generating steam for our thermal recovery operations. Marketing
revenues and expenses mainly relate to natural gas purchased from
third parties that moves through our gathering and processing
systems and then is sold to third parties. Transportation sales
relate to water and other liquids that we transport on our systems
on behalf of third parties and have not been significant to date.
Operating expenses also include the effect of derivative
settlements (received or paid) for gas purchases.
(2) Total unhedged operating
expenses equals total operating expenses, excluding the derivative
settlements paid (received) for gas purchases.
PRODUCTION STATISTICS
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
Net Oil, Natural Gas
and NGLs Production Per
Day(1): |
|
|
|
|
|
Oil
(MBbl/d) |
|
|
|
|
|
California |
22.2 |
|
23.4 |
|
23.0 |
Utah |
1.9 |
|
2.2 |
|
2.7 |
Colorado |
— |
|
— |
|
— |
Total oil |
24.1 |
|
25.6 |
|
25.7 |
Natural gas
(MMcf/d) |
|
|
|
|
|
California |
— |
|
— |
|
— |
Utah |
11.0 |
|
11.5 |
|
12.1 |
Colorado |
7.7 |
|
7.7 |
|
8.8 |
Total natural gas |
18.7 |
|
19.2 |
|
20.9 |
NGLs
(MBbl/d) |
|
|
|
|
|
California |
— |
|
— |
|
— |
Utah |
0.4 |
|
0.3 |
|
0.4 |
Colorado |
— |
|
— |
|
— |
Total NGLs |
0.4 |
|
0.3 |
|
0.4 |
Total Production
(MBoe/d)(2) |
27.6 |
|
29.1 |
|
29.6 |
|
|
|
|
|
|
__________
(1) Production represents volumes sold during
the period.
(2) Natural gas volumes have been converted to
Boe based on energy content of six Mcf of gas to one Bbl of oil.
Barrels of oil equivalence does not necessarily result in price
equivalence. The price of natural gas on a barrel of oil equivalent
basis is currently substantially lower than the corresponding price
for oil and has been similarly lower for a number of years. For
example, in the three months ended September 30, 2020, the average
prices of Brent oil and Henry Hub natural gas were $43.34 per Bbl
and $2.00 per MMBtu respectively, resulting in an oil-to-gas ratio
of approximately 4 to 1 on an energy equivalent basis.
CAPITAL EXPENDITURES (ACCRUAL BASIS)
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
|
|
(in thousands) |
Capital expenditures (accrual basis)(1) |
$ |
3,995 |
|
|
$ |
15,204 |
|
|
$ |
63,488 |
|
__________
(1) Excludes capitalized overhead,
capitalized interest, acquisitions and asset retirement
spending
NON-GAAP FINANCIAL MEASURES AND
RECONCILIATIONS
Adjusted Net Income (Loss) is not a measure of
net income (loss), Levered Free Cash Flow is not a measure of cash
flow, and Adjusted EBITDA is not a measure of either, in all cases,
as determined by GAAP. Adjusted EBITDA, Adjusted Net Income (Loss)
and Levered Free Cash Flow are supplemental non-GAAP financial
measures used by management and external users of our financial
statements, such as industry analysts, investors, lenders and
rating agencies.
We define Adjusted EBITDA as earnings before
interest expense; income taxes; depreciation, depletion, and
amortization; derivative gains or losses net of cash received or
paid for scheduled derivative settlements; impairments; stock
compensation expense; and other unusual, out-of-period and
infrequent items, including restructuring costs and reorganization
items. We define Levered Free Cash Flow as Adjusted EBITDA less
capital expenditures, interest expense and dividends.
Our management believes Adjusted EBITDA provides
useful information in assessing our financial condition, results of
operations and cash flows and is widely used by the industry and
the investment community. The measure also allows our management to
more effectively evaluate our operating performance and compare the
results between periods without regard to our financing methods or
capital structure. Levered Free Cash Flow is used by
management as a primary metric to plan capital allocation to
sustain production levels and for internal growth opportunities, as
well as hedging needs. It also serves as a measure for assessing
our financial performance and our ability to generate excess cash
from operations to service debt and pay dividends.
Adjusted Net Income (Loss) excludes the impact
of unusual, out-of-period and infrequent items affecting earnings
that vary widely and unpredictably, including non-cash items such
as derivative gains and losses. This measure is used by management
when comparing results period over period. We define Adjusted
Net Income (Loss) as net income (loss) adjusted for derivative
gains or losses net of cash received or paid for scheduled
derivative settlements, other unusual, out-of-period and infrequent
items, including restructuring costs and reorganization items and
the income tax expense or benefit of these adjustments using our
effective tax rate.
While Adjusted EBITDA, Adjusted Net Income
(Loss) and Levered Free Cash Flow are non-GAAP measures, the
amounts included in the calculation of Adjusted EBITDA, Adjusted
Net Income (Loss) and Levered Free Cash Flow were computed in
accordance with GAAP. These measures are provided in addition to,
and not as an alternative for, income and liquidity measures
calculated in accordance with GAAP. Certain items excluded from
Adjusted EBITDA are significant components in understanding and
assessing our financial performance, such as our cost of capital
and tax structure, as well as the historic cost of depreciable and
depletable assets. Our computations of Adjusted EBITDA, Adjusted
Net Income (Loss) and Levered Free Cash Flow may not be comparable
to other similarly titled measures used by other companies.
Adjusted EBITDA, Adjusted Net Income (Loss) and Levered Free Cash
Flow should be read in conjunction with the information contained
in our financial statements prepared in accordance with GAAP.
Adjusted General and Administrative Expenses is
a supplemental non-GAAP financial measure that is used by
management and external users of our financial statements, such as
industry analysts, investors, lenders and rating agencies. We
define Adjusted General and Administrative Expenses as general and
administrative expenses adjusted for restructuring and other
non-recurring costs and non-cash stock compensation
expense. Management believes Adjusted General and
Administrative Expenses is useful because it allows us to more
effectively compare our performance from period to period.
We exclude the items listed above from general
and administrative expenses in arriving at Adjusted General and
Administrative Expenses because these amounts can vary widely and
unpredictably in nature, timing, amount and frequency and stock
compensation expense is non-cash in nature. Adjusted General and
Administrative Expenses should not be considered as an alternative
to, or more meaningful than, general and administrative expenses as
determined in accordance with GAAP. Our computations of Adjusted
General and Administrative Expenses may not be comparable to other
similarly titled measures of other companies.
ADJUSTED NET INCOME (LOSS)
The following table presents a reconciliation of
the GAAP financial measure of net income (loss) to the non-GAAP
financial measure of Adjusted Net Income (Loss).
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
|
|
($ thousands, except per share amounts) |
Net (loss) income |
$ |
(18,864 |
) |
|
$ |
(64,901 |
) |
|
$ |
52,649 |
|
Subtract: discrete income tax items |
(2,394 |
) |
|
— |
|
|
— |
|
Add (Subtract): |
|
|
|
|
|
(Losses) gains on oil and natural gas derivatives |
(4,220 |
) |
|
43,192 |
|
|
(42,501 |
) |
Net cash received for scheduled derivative settlements |
35,476 |
|
|
51,874 |
|
|
15,153 |
|
Other operating expenses (income) |
1,648 |
|
|
(1,192 |
) |
|
(550 |
) |
Non-recurring costs |
1,473 |
|
|
316 |
|
|
219 |
|
Reorganization items, net |
— |
|
|
— |
|
|
170 |
|
Total additions, net |
34,377 |
|
|
94,190 |
|
|
(27,509 |
) |
|
|
|
|
|
|
Income tax benefit (expense)
of adjustments at effective tax rate(1) |
333 |
|
|
(24,680 |
) |
|
7,620 |
|
Adjusted Net Income |
$ |
13,452 |
|
|
$ |
4,609 |
|
|
$ |
32,760 |
|
|
|
|
|
|
|
Basic EPS on Adjusted Net
Income |
$ |
0.17 |
|
|
$ |
0.06 |
|
|
$ |
0.40 |
|
Diluted EPS on Adjusted Net
Income |
$ |
0.17 |
|
|
$ |
0.06 |
|
|
$ |
0.40 |
|
|
|
|
|
|
|
Weighted average shares of
common stock outstanding - basic |
79,879 |
|
|
79,795 |
|
|
80,982 |
|
Weighted average shares of
common stock outstanding - diluted |
80,062 |
|
|
80,640 |
|
|
81,051 |
|
__________
(1) Excludes discrete income
tax items from the total additions, net line item and the tax
effect the discrete income tax items have on the current year
effective tax rate
ADJUSTED EBITDA AND ADJUSTED EBITDA
UNHEDGED
The following tables present a reconciliation of
the GAAP financial measures of net income (loss) and net cash
provided or used by operating activities to the non-GAAP financial
measures of Adjusted EBITDA and Adjusted EBITDA Unhedged.
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
|
|
|
|
($ thousands) |
Net (loss) income |
$ |
(18,864 |
) |
|
$ |
(64,901 |
) |
|
$ |
52,649 |
|
Add (Subtract): |
|
|
|
|
|
Interest expense |
8,391 |
|
|
8,676 |
|
|
8,597 |
|
Income tax (benefit) expense |
(2,190 |
) |
|
(22,623 |
) |
|
20,171 |
|
Depreciation, depletion and amortization |
35,905 |
|
|
37,512 |
|
|
27,664 |
|
Derivative (gain) loss |
(4,220 |
) |
|
43,192 |
|
|
(42,501 |
) |
Net cash received for scheduled derivative settlements |
35,476 |
|
|
51,874 |
|
|
15,153 |
|
Other operating expense (income) |
1,648 |
|
|
(1,192 |
) |
|
(550 |
) |
Stock compensation expense |
3,896 |
|
|
4,579 |
|
|
2,360 |
|
Non-recurring costs |
1,473 |
|
|
316 |
|
|
219 |
|
Reorganization items, net |
— |
|
|
— |
|
|
170 |
|
Adjusted EBITDA |
$ |
61,515 |
|
|
$ |
57,433 |
|
|
$ |
83,931 |
|
Net cash received for
scheduled derivative settlements |
(35,476 |
) |
|
(51,874 |
) |
|
(15,153 |
) |
Adjusted EBITDA unhedged |
$ |
26,039 |
|
|
$ |
5,559 |
|
|
$ |
68,778 |
|
|
|
|
|
|
|
Net cash provided by operating
activities |
$ |
57,997 |
|
|
$ |
41,939 |
|
|
$ |
68,774 |
|
Add (Subtract): |
|
|
|
|
|
Cash interest payments |
14,435 |
|
|
648 |
|
|
14,864 |
|
Cash income tax payments |
221 |
|
|
— |
|
|
— |
|
Non-recurring costs |
1,473 |
|
|
316 |
|
|
219 |
|
Other changes in operating assets and liabilities |
(12,611 |
) |
|
14,530 |
|
|
74 |
|
Adjusted EBITDA |
$ |
61,515 |
|
|
$ |
57,433 |
|
|
$ |
83,931 |
|
Net cash received for
scheduled derivative settlements |
(35,476 |
) |
|
(51,874 |
) |
|
(15,153 |
) |
Adjusted EBITDA unhedged |
$ |
26,039 |
|
|
$ |
5,559 |
|
|
$ |
68,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LEVERED FREE CASH FLOW
The following table presents a reconciliation of
Adjusted EBITDA to the non–GAAP measures of Levered free cash flow.
The reconciliation of Adjusted EBITDA is presented above.
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
|
|
($ thousands) |
Adjusted EBITDA |
$ |
61,515 |
|
|
$ |
57,433 |
|
|
$ |
83,931 |
|
Subtract: |
|
|
|
|
|
Capital expenditures - accrual basis(1) |
(5,426 |
) |
|
(16,528 |
) |
|
(63,488 |
) |
Interest expense |
(8,391 |
) |
|
(8,676 |
) |
|
(8,597 |
) |
Cash dividends declared |
— |
|
|
— |
|
|
(9,720 |
) |
Levered free cash flow |
$ |
47,698 |
|
|
$ |
32,229 |
|
|
$ |
2,126 |
|
Net cash received for
scheduled derivative settlements |
(35,476 |
) |
|
(51,874 |
) |
|
(15,153 |
) |
Levered free cash flow
unhedged |
$ |
12,222 |
|
|
$ |
(19,645 |
) |
|
$ |
(13,027 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
__________
(1) Includes capitalized
overhead
ADJUSTED GENERAL AND ADMINISTRATIVE
EXPENSES
The following table presents a reconciliation of the GAAP
financial measure of general and administrative expenses to the
non-GAAP financial measures of Adjusted general and administrative
expenses.
|
Three Months Ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
|
|
($ in thousands except per MBoe amounts) |
General and administrative expenses |
$ |
19,173 |
|
|
$ |
18,777 |
|
|
$ |
16,434 |
|
Subtract: |
|
|
|
|
|
Non-cash stock compensation expense (G&A portion) |
(3,812 |
) |
|
(4,380 |
) |
|
(2,275 |
) |
Non-recurring costs |
(1,473 |
) |
|
(316 |
) |
|
(219 |
) |
Adjusted general and
administrative expenses |
$ |
13,888 |
|
|
$ |
14,081 |
|
|
$ |
13,940 |
|
|
|
|
|
|
|
General and administrative
expenses ($/MBoe) |
$ |
7.56 |
|
|
$ |
7.09 |
|
|
$ |
6.04 |
|
Subtract: |
|
|
|
|
|
Non-cash stock compensation expense ($/MBoe) |
(1.50 |
) |
|
(1.65 |
) |
|
(0.84 |
) |
Non-recurring costs ($/MBoe) |
(0.58 |
) |
|
(0.12 |
) |
|
(0.08 |
) |
Adjusted general and
administrative expenses ($/MBoe) |
$ |
5.47 |
|
|
$ |
5.31 |
|
|
$ |
5.13 |
|
|
|
|
|
|
|
Total MBoe |
2,537 |
|
|
2,650 |
|
|
2,719 |
|
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